Take a mortgage to help with your finances at purchase. It usually starts with the underwriting services. Mortgage Underwriting allows us to check and assess the ability of the borrower to pay in return the loan with interest payments. A thorough check is done by the lender on the factors like credit history, collateral, income stability, and wealth to come to a final decision.
Below are the critical areas of mortgage underwriting to be focussed on by the lender.
This is the first step. You must fill out the mortgage application. The provided information decides whether you are applicable to the loan. The lender should ensure that the following documents are available at the time of submission by the client.
- ID and Social Security number
- W-2s or I-9s from the past two years
- Pay stubs from the last 30 days
- Proof of any other sources of income
- Federal tax returns
- Details on long-term debts.
- Recent bank statements and proof of other assets
- Real estate property information
Once the loan application is selected, the loan processor will send the documents to the underwriter. The mortgage underwriter then decides whether to accept or reject the loan application. Here, the three C’s of the underwriting are checked. They are Credit, Capacity, and Collateral.
- Credit: In the credit history, the underwriter should check how well the payments are done in the case of a student, car loans, and other credit lines. Here, they have to make sure that you are capable to pay back your loan amount with interest payments.
- Capacity: The underwriter has to review the income, employment, debt, and other assets while determining your means to pay the loan. Savings, accounts, tax returns, other income records, and debt to income ratio has to be reviewed.
- Collateral: Here the underwriter has to check whether a correct collateral is being provided for the loan. Thus, ensuring that, it would act as the correct unpaid balance in case of any default.
A valuation of the collateral is essential. The value of the home is determined by the location, size, features, and condition of the property. Getting an appraisal protects both the lender and the buyer. It ensures that you pay what the home is worth. Here, the lender should enquire for what purpose the property is used for. He should ensure that it is not used for any unlawful purpose. This is because if in any case, the property is unlawful, the ownership lies with the lender.
Check for claims and Title insurance
The lender must ensure that the property has no legal claims upon it. This would ensure to protect the claim to the property once the borrower is unable to repay the debt.
For mortgage underwriting support services, a title company is hired. It searches the history of the property, tax liabilities, liens, zonal restrictions, and prior mortgages. The title issuer gives insurance policies that protect both the lender and the buyer.
Underwriter has to make the decision
The underwriter could make approve, deny, or pending decisions.
- Approve: This means a direct way to clear closing. No more documents are necessary to be provided.
- Denied: Here the reason for denial must be known to go for the next steps. A low credit score and too much debt could be the reason for denial.
- Pending: If the required information is not provided, then the application would move to pending. So, they will ask for further documents to approve the loan.
Before three days of closing, a Closing Disclosure(CD) would be received to the buyer from the lender. CD involves the loan terms, monthly payments, and the final costs.
Since the mortgage underwriting services involve the collection and interpretation of a large amount of data with knowledge and skills, lenders choose to outsource the mortgage services.
Mortgage Outsourcing 360 is a leading mortgage outsourcing company that provides mortgage assistance through its services. For more information about our services contact us at email@example.com